Less Corruption And A Stronger Judiciary Bring New Investors

An economist by training, Swiss Ambassador H.E. Philippe Guex monitors Serbia’s economic reforms with particular attention and claims that the biggest successes in the European integration process have been made on the macroeconomic front.

The Swiss Ambassador expects greater interest in Serbia among foreign investors, the prerequisite for which is a more stable business environment that implies combatting corruption and a stronger judicial system. Ambassador Guex explains why he believes that the EU is for Serbia what the North Star was for the three wise men of the Bible. Speaking about his impressions of Belgrade, Ambassador Guex notices the great interweaving of history and current politics both in Serbia and throughout the entire region.- When I took on my duties in Belgrade, I was indeed struck by the level of resentment that remains in the whole region, not only due to the wars of the ‘90s, but also going back to World War II. Be it in Zagreb, Sarajevo, Pristina or Belgrade, political life is frequently punctuated by sudden surges of tension linked to the past. The rhetoric can turn to provocative statements with nationalist references. These incidents are a symptom of a reconciliation process that has yet to be achieved. Reconciliation can occur only if it is underpinned by sincere political devotion to dealing with the past, which then should not be obstructed by a nationalist narrative. The recent appointment of the new Serbian War Crimes Prosecutor after a long vacancy can serve as an important step in this regard.

You also used an unusual metaphor to praise the Serbian Government’s commitment to European integration. Specifically, you said in an interview that “for this government joining the EU is what the North Star was for the three wise men from the Bible”. That’s a strong metaphor for an observer from a country that isn’t a member of the EU?

– I used the metaphor of the three wise men from the Bible because the journey to EU membership is on a long and rocky path. Reforms which have to be carried out are often painful and unpopular. And Serbia has to implement these reforms for its own sake and not just to please Brussels. This is not always well understood by the population. During this long journey, the challenge for the Serbian government is not to get distracted by alternative ways, hence the use of the North Star metaphor.

As a Swiss diplomat, I do not have any problem speaking positively about the EU, because there are few EU countries that are as integrated into the EU as Switzerland. We are the EU’s third biggest trade partner after the U.S. and China. Goods worth a billion euros are traded every single working day. The 1.4 million EU citizens living in Switzerland represent 16 per cent of the population. Every working day 300,000 EU citizens cross the Swiss border to go to work. The reasons why Switzerland does not belong to the EU are linked to our history and our semi-direct political institutions. Swiss politicians largely recognise that the EU is the main guarantor of stability and prosperity in Europe.

Reforms which have to be carried out are often painful and unpopular. And Serbia has to implement these reforms for its own sake, and not just to please Brussels

After the relatively short time you’ve spent in Serbia, how would you assess bilateral relations with Switzerland?

– Bilateral relations are based on four pillars: (a) strong high-ranking political ties; (b) a large Serbian diaspora; (c) still modest bilateral economic relations, but with much potential; (d) significant development and economic cooperation, with Switzerland among the “top three” bilateral donors in Serbia.

The Serbian diaspora encompasses 200,000 people who live and work in Switzerland, contributing to the prosperity of the country. Switzerland has been a country of emigration for citizens of the former Yugoslavia since the early 1960s. As such, it is not surprising that today five per cent of the Swiss population speak Serbo-Croatian as their first language. From an economic perspective, the diaspora living in Switzerland sends about €400 million of remittances to their relatives in Serbia each year. This significant Serbian diaspora could be a pool for new investments in Serbia that needs to be further exploited.

Annual trade with Serbia is rather modest (€300 millions), as it accounts for only one per cent of Switzerland’s global trade. However, Swiss direct investments total amount €900 million, making Switzerland the 10th largest investor in Serbia. I expect direct investments to increase in the future, as the Serbian economy becomes more competitive and the enforcement of the rule of law more reliable.

Export-orientated, outsourced services are clearly a sector to which Swiss companies are paying more and more attention when considering investing in Serbia. For the time being, the focus is mainly on engineering, information technology and online customer services. A clear competitive advantage is well-educated personnel who are fluent in English. Last but not least, the Swiss-Serbian Chamber of Commerce, chaired by Yana Mikhailova, is a driving force behind intensifying trade and investments between our two countries.

The Serbian Government’s economic policy is driven by foreign direct investment and privatisations. It is therefore crucial for the Government to give the investors the predictability they need

As an economist, how would you assess reforms in the economic domain, and what is lacking that would ensure a large influx of foreign investment?

– The austerity policy of the Government has brought the Serbian economy back onto a sound economic footing: a substantial reduction of public deficit, inflation under control and stabilisation of the national currency. By the way, not a single euro zone country would be able to achieve what Serbia did: reducing the public deficit by five per cent of GDP within two years.

In any place on this planet, foreign and domestic investors need the same: profitability and predictability. In countries like Serbia, which have to catch-up with the rest of Europe in an economic sense, investment profitability is usually not a concern. But predictability is. You get predictability by improving rule-of-law, guaranteeing judicial independence, fighting against corruption and making tax administration transparent. Serbia has certainly made substantial progress in terms of business climate, but there is still space for improvement in order to bring predictability for investors, in line with European standards. The Serbian Government’s economic policy is driven by foreign direct investment and privatisations. It is therefore crucial for the Government to give the investors the predictability they need.

Considering Swiss business practises, what would you suggest that the Serbian government focus on in the future?

– If Switzerland has managed to maintain one of the most competitive industries in the world, it is because it never had an industrial policy. If Switzerland is among the most competitive countries in terms of R&D and innovation, it is because it never had an innovation policy. The Swiss “state hands-off policy” is certainly a source of inspiration for Serbia, in particular when it comes to privatising Serbian state-owned companies.

The dual education system is a second source of inspiration for Serbia. In Switzerland, two-thirds of young men and women choose a dual education system pathway. With this background, we are ideally positioned to promote youth employment in Serbia. That’s why we are pleased to support the Government’s continuing reform initiatives to develop a Serbian dual education system. With this aim, the Swiss Embassy’s Cooperation Office has launched a €7 million programme in Serbia called E2E, which stands for Education to Employment.

Have you had the opportunity to hear the concerns of the academic community, educators and trade unions regarding the initiative to introduce dual education, which is being considered with a view to the Swiss model?

– We are aware of the concerns of the academic community, educators and trade unions. At the same time, in Serbia we observe a significant mismatch in the labour market, where the offer of skilled labour often doesn’t match the demanded skills of the private sector. Taking into account the high unemployment rate in Serbia, particularly among young people, we think it is important to try to reduce this gap in the labour market. One way to do that is to more strongly involve the private sector in the development of curricula, in order to ensure that the vocational formation equips future employees with the skills needed in the workplace. In Switzerland we have a long tradition of dual educational training and we see that continuous dialogue and collaboration between the private sector and vocational schools is crucial to ensure the development of the skilled people demanded by the labour market. Experiences in Switzerland and elsewhere also show that it is often a valuable experience for apprentices to grow within a company, and they identify strongly with “their” companies. However, we are aware that the introduction of elements of the dual vocational education system represents a substantial change for the Serbian education system. From our perspective, the concerns which different stakeholders expressed need to be taken seriously. It is important that decision makers enter into an open and transparent dialogue with all stakeholders, in order to answer open questions and take on recommendations to counteract those concerns.

Following Montenegro’s accession to NATO, the issue of relations with the Alliance is again in focus. Your predecessor considered that Serbia could remain neutral. What is your stance?

– Serbia is a key country for the stability of the whole region. Therefore Belgrade’s foreign policy draws much attention from abroad. No country has ever been forced to join NATO. Six EU member states are not part of NATO, namely Austria, Sweden, Finland, Ireland, Cyprus and Malta. It goes without saying that Serbia, as a sovereign state, can remain neutral. Look at Switzerland: we have been neutral for 500 years now.

It is important that decision makers enter into an open and transparent dialogue with all stakeholders, in order to answer open questions and take on recommendations to counteract those concerns

We saw you visiting the Nikola Tesla B thermal power plant, which has been modernised thanks to a Swiss donation. What can you say about this project, which should significantly reduce harmful gas emissions?

– Overall, the TENT B project is very successful. We experienced some delays in implementation, but now that the monitoring and control room is fully rehabilitated in both units, we are very satisfied with the results. Through energy efficiency gains in both units, we expect a reduction of CO2 emissions that corresponds approximately to the CO2 emissions of an Airbus A320 flying 11,200 times along the Belgrade-Zurich route, or which equals the annual CO2 emissions of the entire urban population of Obrenovac. These are substantial results that show a significant reduction in CO2 emissions. The project partner, Electric Power Industry of Serbia (EPS), proved to be a good and dedicated partner and we experienced good collaboration, which is crucial for the successful implementation of such a project. However, despite the good results of the TENT B project, Switzerland will in the future concentrate its support on projects that are more strongly linked to renewable energy sources, instead of coal-based energy projects.

You signed an agreement with the Serbian Ministry of Energy and Mining to grant eight million euros to improve energy efficiency in public buildings, mostly schools, in Serbia. Could you tell us something about the Energy Cities Project, which is being implemented within the framework of the Strategy for Cooperation of Switzerland with Serbia for the period 2014-2017?

– In our view, the Municipal Energy Efficiency and Management Project (MEEMP) is a very inspiring project. Besides the concrete implementation of energy efficiency measures in 26 public buildings and capacity building measures, Switzerland will support the introduction of the European Energy Award (EEA). The EEA is an originally Swiss approach to energy management at the local level, connected deeply to Swiss expertise and knowhow. In the case of Serbia, the EEA will be suitable to support municipalities in implementing the new Serbian law on energy efficiency. We are looking forward to starting the implementation of the project and to seeing the EEA approach implemented in Serbia. We are convinced that this energy management tool, which is already used in 1,300 municipalities in 11 countries, will also be very useful for Serbian municipalities, contributing to the development of sustainable energy management at the local level.

Swiss International Airlines has established a new Niš-Zurich route. How important is this route and could it become a permanent link after the summer?

– The new Zurich-Niš route is in fact a permanent, all-year-round, flight. This new link is an additional window enabling more business, more tourism and more family reunions for the Serbian diaspora living in Switzerland. There is a strong need for South Serbia to improve its connection with the rest of Europe. South Serbia has serious competitive advantages to promote abroad. Therefore I am confident that this new route will bring this region closer to potential Swiss investors, as it needs more trade, more foreign investments and more jobs. There are a total of 37 flights a week connecting our two countries. With four flights a day, Zurich has become the top route of Nikola Tesla Airport. It is yet more evidence of how intense our bilateral relations have become throughout the years.

Moreover, Zurich International Airport is leading a consortium that is bidding in the public tender to grant a concession for the management of the Nikola Tesla Airport in Belgrade. Considering the significance of the Belgrade-Zurich route, substantial synergies would materialise if Zurich Airport were to get the concession.

Switzerland will in the future concentrate its support on projects that are more strongly linked to renewable energy sources, instead of coal-based energy projects

You are continuing the tradition of Swiss ambassadors when it comes to fostering cultural ties and supporting artists in Serbia. What can you announce for the coming autumn season?

– Firstly, let me point out that local artists contribute greatly to mutual understanding between different cultures, being usually tolerant and open-minded citizens. In a society they are implicitly, if not explicitly, advocates of “living together”. As people-to-people exchanges remain the backbone of our bilateral relations, my first priority is to bring Swiss artists to Serbia, and vice versa. We are working on an exhibition that will gather three Swiss artists and three Serbian artists, and which will take place in two different locations in Belgrade.

Secondly, we recently welcomed young Swiss pilgrim artist Marinka Limat, who is walking from Kassel (Germany) to Athens, a 2,500 km journey crossing nine countries within 167 days. This pilgrimage is a tribute to the major cultural event “Dokumenta” in Kassel, the 2017 edition of which has been relocated to Athens under the topic “North is meeting South”. As Belgrade is the city par excellence when it comes to “West meeting East”, I am pleased that Marinka made a major stopover at the U10 collective gallery and met several Serbian artists in town.

Additionally, an exhibition curated by the Swiss Institute in New York is currently open to the public (until 21st August) at the Čolaković Legacy of the Museum of Contemporary Art. The Swiss Embassy in Belgrade is also supporting performances of two theatre plays for the upcoming BITEF, performed by Konzert Theatre Bern and directed by Ersan Mondtag. BITEF is followed by the Belgrade Book Fair 2017 in October, where Switzerland, Germany, Austria and Liechtenstein are guests of honour under the theme “4 countries, 1 language”.